Consultation on the proposal to make a market investigation reference into the mobile radio network for emergency services
Detail of outcome
The CMA has decided to refer the supply of the land mobile radio network services for public safety (and ancillary services) for a market investigation.
Further details about the market investigation can be found in the in the final report and decision on a market investigation reference.
Feedback received
Detail of feedback received
Details of feedback received are set out above.
Original consultation
Consultation description
The Airwave network is a secure private mobile radio communications network for organisations involved in public safety in Great Britain. Currently, there is no alternative method for the police, fire and emergency services staff to communicate securely with each other when in the field.
The Airwave network was commissioned by the Home Office in 2000 under a Private Finance Initiative framework arrangement (the PFI Agreement) that was due to end in December 2019. At this point the network was expected to be shut down and a different secure communications solution using a commercial 4G mobile network was to become operational (referred to as the Emergency Services Network or ESN).
Motorola Solutions, Inc. (Motorola) won one of the key contracts for the delivery of ESN in 2015 and purchased Airwave Solutions Limited (Airwave Solutions, the owner and operator of the Airwave network) in 2016.
In the last 2 years, there have been increasing concerns about the delays to the roll-out of ESN and costs to the British taxpayer of the continuing operation of the Airwave network. It is now expected that the Airwave network will continue until the end of 2026.
Our current view, based on the available information, is that the market for the supply of the Airwave network in Great Britain is not working well for the following reasons:
- the highly differentiated and bespoke nature of the Airwave network, requiring it to be designed, built and operated under a long-term exclusive contract,
- the dual role of Motorola, as owner of Airwave Solutions and key supplier in the roll-out of ESN since 2016, with the incentives such a position creates,
- the absence of competitive tension in the award of the original contract, with only one supplier taking part in the bidding process and the resulting likely uncompetitive pricing structure, and
- the delays in the roll-out of ESN that have necessitated the extension of the Airwave network by three years to 2022 and now require a further extension until the end of 2026, thereby prolonging the likely uncompetitive pricing structure well beyond the original term of the PFI Agreement.
This has resulted in significant detriment for customers, as evidenced by the persistently high and increasing returns achieved by Motorola in the 4-5 years to 2019. The harm in this market and the burden of any excess profits made by Motorola (around £700 million as at 2019) ultimately falls to the British taxpayer. This customer detriment will also continue for as long as the Airwave network remains in place; end of 2026 is the latest expected shut down date and our calculations suggest that a further £1.2 billion in excess profits may be expected to be extracted by Motorola from 2020 to 2026.
For the reasons above, we are now proposing to launch a market investigation reference (MIR) relating to the Airwave network and are consulting accordingly.